NSW homes act to stymie consumers

Legislation designed to boost apartment construction in NSW will make business smoother for insurers and developers, while leaving consumers with some of the weakest protections against shoddy workmanship in the country.

The NSW Coalition last week introduced the Home Building Amendment Bill 2011 to Parliament, saying it addressed shortcomings in legislation and would help lift home building from record low levels.

It is set to take effect early next year.

If passed, the legislation drastically reduces the mandated warranties developers must offer consumers from seven years to two years for non-structural defects and from seven years to six years for structural defects.

The legal definition between the two is grey but non-structural defects could include fire hazards, poor acoustics, internal fittings and fixtures and electrical wiring.

This is the shortest time to make claims in the country, on par only with Canberra, where courts have been burdened by cases claiming building defects along the Kingston foreshore.

In Victoria, where apartment building is abundant, there is a 10-year time limit for all kinds of defects and all other states offer at least five years.

It will make a lot of claims practically impossible to pursue, according to strata lawyer David Bannerman. “Most defects do not manifest in the first two years of a building," he said.

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“Thus, the result of the proposed amendment would generally leave consumers without any remedy at all as their rights will be extinguished prior to most defects becoming noticeable."

In order to launch a case, apartment owners need to get professional inspections, obtain legal advice and get a resolution through the owners’ corporation.

Mr Bannerman said this could be especially difficult in the first year of an apartment being completed as a developer typically held a majority of unsold apartments and therefore controlled the owners’ committee.

He said his firm alone had about 100 cases in court over defects, representing some 10,000 dwellings. However the new legislation does contain some advantages for consumers. Builders and developers will no longer be able to use proportionate liability laws to shift responsibility to their subcontractors for warranty breaches, which will make a lot of court cases much simpler.

A spokesperson for NSW Fair Trade Minister
Anthony Roberts
said the legislation would enable the timely return of “many millions of dollars" in bank guarantees to builders, as insurers were now holding them due to uncertainty over the period of liability.

He said complaints data showed structural defects usually manifested within six years and was confident two years was sufficient to address non-structural problems.

Mr Roberts said in a statement before introducing the legislation last week: “The message from stakeholders from across the home-building sector is that urgent action is needed to address a wide range of issues with the current legislation."

Lobbying efforts by developer groups have mostly focused on planning blockages, excessive fees and charges and the difficulty to obtain bank funding as the roots of poor building levels in NSW.